Undoubtedly the IMF has made a remarkable success in achieving most of its principal objectives:
1. The primary goal of the IMF was to promote stability in exchange rates. The measure of exchange stability that the world has witnessed in the IMF era is remarkably superior to what was seen during the inter-war period or gold standard regime. Under IMF arrangements, stable exchange rates do not imply rigid exchange rates. IMF’s object is to combine the merits of stability with flexibility in exchange management.
It is aimed at avoiding competitive exchange depreciations by requiring members to declare the par values of their currencies fixed in terms of gold or the U.S. dollar. However, it permitted an orderly adjustment of exchange rates when this was needed for correcting fundamental disequilibrium in a country’s balance of payments. The recent devaluation of the Indian rupee (in 1966) and that of pound-sterling were justified by the IMF.
2. The IMF also served as an expert institution for consultation and guidance in international monetary matters. It serves as an excellent forum for discussions, practically on a day-to-day basis, of the economic, fiscal and financial policies of member nations, with particular reference to their balance of payments impact. The Fund has created a feeling among the member nations that, their economic problems are not their exclusive concern but of the whole international society.
3. The Fund has contributed in certain ways to the expansion of world trade. By providing credit facilities to member countries, the IMF has reduced the need for their imposing import quotas and resorting to exchange controls. It assists the deficit countries in meeting their temporary disequilibrium in the balance of payments. It also “works for facilitating multi-lateral payments and trade, promoting thereby, international trade as a whole.
4. In recent years the Fund has achieved some success in bringing about a simplification of the multiple exchange system at least in countries that have sought financial assistance from the Fund.
5. The Fund has been instrumental in ensuring steady progress in the establishment of a multilateral system of payments in respect of current transactions. However, little success has been achieved in this direction due to agencies and organisations out of the Fund’s purview.
6. In the beginning, the Fund pursued a conservative credit policy, refusing loans for any purpose other than correcting a fundamental disequilibrium in the balance of payments. Moreover, the IMF credit was of short-term duration only. Lately, however, the Fund has changed its attitude by accepting a more liberal credit policy. Today, the Fund grants development loans, too. Hence, the quantum of borrowings from the Fund has shown a marked increase in recent years.
7. In a nutshell, the Fund has thus, been able to secure all the advantages of managed paper standard by maximising employment and accelerating the pace of economic development and of the gold standard by maintaining comparative economic stability, while carefully avoiding the disadvantages of either.
8. Moreover, the Fund has been particularly interested-in the newly developing countries of the world and has been liberally assisting them to maintain a healthy balance of payments and monetary stability at home.
In recent years, however, underdeveloped countries have started looking to the Fund to assist them in their economic development programme also. Furthermore, most of the new member countries who have acquired independence recently are facing difficult problems in organising their monetary, fiscal and exchange systems. These countries, thus, require Fund’s growing assistance in constructing a solid monetary and exchange base for their economic growth.
The Fund has been already providing technical assistance to its members in this respect, but now its activity is substantially widened to meet this challenge. In many of these countries, the Fund’s experts have assisted in the formulation of appropriate monetary, fiscal and exchange policies or in the implementation for stabilisation programmes. Besides, the Fund has organised, since 1964, a Fiscal Affairs Department whose officers advise member countries on matters relating to tax policy, tax systems, tax administration, budgeting, etc. The Fund has also organised the Central Banking Advisory Service to provide technical advice to newly developing countries to establish or improve their central banks. An IMF Institute is also started by the Fund in 1964 to train the officials of member nations.
Above all, to solve the current international liquidity problem, the IMF has succeeded in establishing the SDR scheme.
Mr. P. P. Schweitser rightly expressed his strong conviction that the Fund is ideally and flexibly constructed to perform the new tasks and to provide the new facilities that may be needed in the course of the continuing evolution of the international monetary system.